What is the definition of 'Net Sales' for a 7 Brew franchise, and how does it differ from 'Gross Sales'?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
| The average and median Store-Level EBITDAR | |
|---|---|
| margins are the numbers resulting arithmetically from calculating the average and median | |
| performance, respectively, in all of the sales, profit, and expense line-items appearing in the | |
| Exhibit 2 statement. |
- i. "Gross Sales" means the aggregate revenue received from selling, or providing services with respect to, beverages, food, other menu items, and merchandise, whether for cash or on credit, less (a) applicable sales taxes collected and remitted to the appropriate tax authority, (b) valid coupon credits and employee discounts deducted from revenue initially recorded as Gross Sales in an amount equal to 2% of such Gross Sales, and (c) revenue derived from selling or issuing gift cards and loyalty cards (although revenue derived from selling products and services to customers using those cards for payment is included in Gross Sales), but without deducting any other costs or expenses whatsoever. Of the 180 Measured Stores, 91 Stores (51%) exceeded the sample's average Gross Sales of $2,040,883.
- ii.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 61–73)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, 'Gross Sales' is defined as the total revenue from selling beverages, food, other menu items, and merchandise, whether the payment is in cash or credit. This figure is calculated after subtracting applicable sales taxes, valid coupon credits, and employee discounts (capped at 2% of Gross Sales), as well as revenue from the sale of gift cards and loyalty cards. However, revenue from customers using gift or loyalty cards for payment is included in Gross Sales. No other costs or expenses are deducted from this amount.
'Net Sales,' on the other hand, is calculated by taking the Gross Sales and subtracting discounts, excluding valid coupon credits and employee discounts. Therefore, the key difference between Gross Sales and Net Sales for a 7 Brew franchise lies in the treatment of discounts. Gross Sales has fewer deductions than Net Sales.
For a prospective 7 Brew franchisee, understanding the distinction between Gross Sales and Net Sales is crucial for accurately assessing the financial performance of their store. While Gross Sales provides a picture of overall revenue, Net Sales offers a more refined view of actual sales revenue after certain discounts. This information is essential for budgeting, financial forecasting, and evaluating the profitability of the franchise.